If you’re looking to use your home to borrow money – be it for debt consolidation, home improvements, purchasing a second property, or other investments – applying with a lender is a necessary step. However, with conventional banks rejecting a large proportion of applications, you might find yourself in a difficult situation. Private mortgage lenders in Aurora cater to people whose banks have declined. These non-institutional financiers offer a viable alternative, focusing more on your property’s worth than your credit score or income. So, if you’re in Aurora and finding the mortgage landscape challenging, turning to a private lender could be your key to securing a loan.
Different Types of Lenders in Aurora
If you want to tap into your home equity or get a loan, you need to know what lenders you can work with. Many are unaware that banks are not their only option for financing. There are other lending options available. The mortgage industry classifies different types of lenders into three broad categories which include:
- A lenders—Banks are the most common type of lender in this category. They require a credit score of at least 650 and substantial household income to qualify for most mortgages. Borrowers are also put through rigorous mortgage stress tests to qualify for a bank-provided mortgage.
- B lenders—Trust companies and credit unions which require at least credit scores of 550 and are also expecting substantial household incomes and additional financial assets to qualify for mortgage financing.
- C lenders—Private lenders who can provide mortgage financing despite poor credit and non-traditional household income, such as freelance, contract-based or self-employed.
How to Get a Private Loan in Aurora
For those Aurora homeowners with poor credit, seeking private mortgage loan financing may be the route. Established private lenders assist with mortgage financing, particularly for homeowners turned down by traditional lenders.
While banks focus on credit and income, private lenders base mortgage financing on your home’s appraisal, offering alternative options. These private mortgage lenders in Aurora will base the amount of financing on:
- The current appraised value of your home.
- The location of your home.
- The current state of your property, including any fix-ups or underlying issues.
- The Loan-to-Value ratio (LTV). Calculate this ratio by taking all existing mortgages plus all proposed mortgages and dividing by the appraisal value. This ratio compares the value of the loan with the value of the home. Private lenders will approve loans with an LTV of up to 75%, meaning they will approve loans worth up to 75% of your home’s current value.
Being prepared and gathering necessary documentation is invaluable when seeking private mortgage financing. Take the steps needed to be well-informed for a potential meeting with a lender:
- A list of additional assets besides your primary residence.
- Paperwork proving all sources of monthly income, including investment income, contract income, self-employed income sources, and child/spousal support monthly income.
- A recent appraisal of your property.
- Two years of Notices of Assessment (NOA), if applicable.
- Clarity on the type of private mortgage financing you will most likely need.
Costs Involved in A Private Lender Mortgage
Private mortgage lenders are more expensive than any other type of mortgage lender. There are no standard costs, but most lenders try to offer rates and fees that are competitive with other lenders. Here are some costs to expect as of December 2024:
- Interest Rates: Typically between 8% and 12%
- Lender Fees: Usually between 2% and 4%
- Broker Fees: Set to match the lender fees, which are usually 2% to 4%
- Appraisal Fee: $500 + HST for single-family homes in Ontario. Larger or unconventional properties will cost more.
- Legal fees: These range from $1,000 to $3,000, depending on the mortgage request.
How LTV Affects Costs
The Loan-to-Value (LTV) ratio plays a big role in determining your costs. Simply put, the closer your mortgage is to the lender’s maximum allowable LTV (typically 75%), the higher your rates and fees. Lenders see higher LTVs as riskier, so they charge more to compensate. Calculate this ratio by taking all existing mortgages plus all proposed mortgages and dividing by the appraisal value.
Here’s an example of how costs can vary based on LTV:
| LTV (%) | Interest Rate (%) | Lender Fees (%) | Broker Fees (%) |
| 50% | 8% | 2% | 2% |
| 60% | 9% | 3% | 3% |
| 70% | 11% | 3.5% | 3.5% |
| 75% | 12% | 4% | 4% |
What You Need to Know About Fees
Your mortgage amount includes specific fees, such as lender, broker, and legal, which are included in your mortgage amount and count toward the LTV. If your request is already at 75% LTV before fees are added, you might exceed the limit and not get approved. Appraisal fees are typically not included in the LTV and are paid by the borrower directly after the inspection is performed.
A good mortgage broker will provide documents that clearly outline all costs related to the mortgage, and whether or not they are included in the mortgage amount. Reviewing the costs with your broker is always a good idea to make sure they fit your financial plan.
When applying for private mortgage lenders in Ontario, you must state why you need the money. Private lenders are usually lenient and will accept the most reasonable responses.
Some popular responses include:
- To pay off high-interest credit card debt
- To pay for home repairs or renovations
- To cover living expenses after a work layoff
- To stop a power of sale or foreclosure
- To pay tuition fees for college or university
In many cases, borrowers approach private lenders for mortgages and loans to help consolidate existing debt or prevent property loss through foreclosure or power of sale proceedings. Many people juggle multiple types of debt at once. For example, as noted above, you might have a mortgage and a significant amount of credit card debt or outstanding student loans. Since mortgage and student loans are owed to different collectors, you may have to keep track of multiple monthly debt payments. A mortgage from a private lender can be enough to pay off what remains on your mortgage and your student loans. Upon settling individual debts, you’ll have a monthly payment to your lender, simplifying your financial obligations. Many borrowers find this an easier way to manage debt.
People who cannot qualify for a low-interest rate loan at a bank are the kind of clients that private lenders seek out. Our private lender network can provide mortgages to people turned down by banks. Most private lenders will offer a rate between 8% to 12%.
Aurora’s Real Estate Market
When it comes to choosing a great place to live, Aurora can’t be overlooked. Nestled in the Greater Toronto Area, Aurora combines natural beauty with affordability and economic opportunities, perfect for small-town living.
Aurora boasts a mix of modern and historic homes in sought-after neighbourhoods like Aurora Estates, Hills of St. Andrew, and Aurora Highlands, conveniently connected to Toronto via the GO train.
In April 2018, the average home price in Aurora was $841,200. As of June 2024, homes in the city have nearly doubled in value, increasing to an average price of $1,508,180, nearly double the price only five years ago. Home values in Aurora have risen substantially, contributing to increased home equity, a valuable asset that grows with property appreciation.
Aurora homeowners likely possess substantial home equity, which serves as collateral for accessing funds without selling, albeit navigating access complexities.
What is the solution? It may be advisable to seek the help of an established and experienced private lender in Aurora. Private lenders in Aurora offer various first and second mortgage options, catering to homeowners with poor credit, high debt, or limited income. If bank approval is unattainable, private lending may be the sole option for homeowners to access necessary funds.
Explore Your Private Mortgage Options in Aurora
We have worked with lenders in Ontario’s real estate industry for over a decade. Throughout this time we have worked with and developed professional relationships with hundreds of real estate professionals and lenders across Ontario and in Aurora. We can leverage these relationships to find private lenders who can work with you.